Given the mismatch between the duration of productive years and the years of only expenses, there is an acute need for financial planning. For such individuals, the money earned has to be put to work in such a manner that it supports theindividual for the rest of his life. “It is a case of sudden wealth for most of such people and it is important that they avoid any impulse decisions regarding both spending and investment,” says Zankhana Shah, chartered accountant & certified financial planner and head of Money care planners. Clarity on long-term financial goals helps in taking informed decisions.

Spending
Spending is not a problem when money is coming in. But there is a need to ponder over lifestyle. While purchasing a house one should also consider the monthly maintenance payable. Many a times, impulse purchases culminate into loss of lifestyle in the future as there is no income to support the same in future. Hence, there is a need to clearly define the lifestyle of an individual.

Investments
There is a need to strike a balance between growth needs and income needs. A combination of equity and debt may serve the purpose. Excessive focus on high-yielding assets stating long-term security is also a problem because there is an income need in the short run. A point to note: the high yielding assets also come with higher volatility and hence may not serve the income need.
The assets that offer lower yield meet the income needs better due to lower volatility. Here, debt securities with fixed coupon pay off. One can also consider single premium deferred annuity plans with the deferment period ending with end of the earning period. Real estate investments can be considered with a clear intention to earn rentals which is again a periodic income. Though, this is an option to be considered with an expert handholding.

Financial liabilities
Loans can be a real drag on one’s financials in times of no earning. Hence, in no circumstances the loans should live beyond the active working life. Temptations such as tax breaks should be kept away when it comes to borrowing.

Insurance
Short earning span makes it even more important that insurance needs are satisfied in totality. Death can mar earnings and make the life miserable for survivors. There are special covers available for dismemberment, disability, which one can avail of to avoid loss of income. For risk covering, single-premium products are better suited. One can also consider long-term cover where the premium payment is made in limited installments.

Alternate occupation
While working there is a need to identify an alternate occupation with minimal investments. This ensures that there will be some income post-retirement. However, the investment needs of the new occupation should not eat into the accumulated kitty

THE first job for any individual marks a turning point in his life. The first paycheck acts as a gateway to new opportunities and of course, financial independence. It could also mean preparing to shoulder responsibilities, if your family budget is in need of augmentation. Even if you are not required to contribute, you still owe it to yourself to handle your finances with care.

Insure yourself:
The first thing that you need to look at once you get your salary is insurance — for yourself as well as your dependants. “You should opt for a term insurance cover now that you have a steady stream of income. If you buy a life cover at a young age, you will have to pay lower premiums. The value of the cover can be 10 times your annual cost-to-company (CTC),” said PARK Financial Advisors’ director Swapnil Pawar. Life insurance premium paid is eligible for tax deduction under Section 80 C, but protection, and not tax benefits, should be the criterion for taking such decisions. However, according to My Financial Advisor’s director Amar Pandit, there is no need to get a life insurance policy in the first year of worklife if you have no dependants. You would be better off acquiring a mediclaim with a cover of Rs 3 lakh-5 lakh, he says. Even if your organisation offers a health cover, it would still be worthwhile to sign up for a standalone policy. In addition, you can claim a deduction of up to Rs 15,000 under Section 80 D on health insurance premiums. You can get a health cover for your parents. It entitles you to an additional tax deduction of up to Rs 15,000.

Avoid loans:
Next, you need to guard against the temptation to borrow funds to purchase cars, bikes or consumer durables. You should leave such decisions for the second year if not later, feel financial advisors. “Consumption loans are not a good idea. Also, if at all you have any surplus left after addressing your needs, it is advisable to avail of a home loan jointly with your parent/s,” adds Mr Pandit.

Strive to save:
“If you are single and living by yourself with a monthly income of less than Rs 25,000, your target savings rate can be 40%, while it can be 50% for those earning Rs 25,000 to Rs 50,000. For people with an income of above Rs 50,000, the ideal savings rate would be 60%,” explains Mr Pawar. A part of the savings could go towards building a corpus for meeting emergency needs.

Invest smart:
“Ideally, you should direct a minimum of 25% of your gross income towards investments,” advises Mr Pandit. If you are jittery about dealing in equities, you could put small amounts of money into PPF and fixed deposits. While FDs can yield a return of around 10% at the moment, you should go for them only if you fall in the no-tax or lowtax brackets. PPF, which carries a return of 8% p.a, offers tax breaks under Section 80 C.
Investing small sums on a regular basis could result in a sizeable corpus over a period of time. If you invest Rs 5,000 every month in a PPF, your kitty would swell to Rs 17.40 lakh after 15 years. The returns are certainly not comparable to those offered by equities, but it is better than letting your money lie idle in a savings account.

The strategy works well for long-term investors
It is an established fact that over the long run, equities as an asset class outperform all other alternative asset classes including real estate. The RBI report on Currency and Finance, 1997-98 revealed the following returns over a 20-year period, compounded annually:

▪ Inflation 9.19 %
▪ Gold 7.62 %
▪ Bank FDs 9.19 %
▪ Company FDs 14.47 %
▪ Equities 20.15 %

It shows that equities have spectacularly outperformed all other assets. I suspect that the difference would get even more pronounced if we were to conduct a similar study today.

Clearly, our investments need to give us returns that beat inflation. Yet, a recent study revealed that only 2% of savings in India are invested in equities.
Why are we Indians so averse to investing in equity?

The reasons, perhaps, lie in the setbacks that Indian investors have received in 1992 and 2000. Also, stock markets are seen as being manipulated by operators and many promoters have earned a reputation for unethical practices. So, investors who had burned their fingers were perhaps justified in having such beliefs.

But one cannot get away from the fact that our approach to investing in equities lacks discipline and is sporadic, with an overwhelming bias towards flavour-of-the-month stocks. When stocks are down, we refuse to even consider them as investment options and when they go up, we chase prices which have already gone up substantially.

A simple method for genuine long-term investors to build wealth would be to invest regularly in units of index funds or exchange traded funds such as Nifty BeES. This strategy might not give you an adrenaline rush, but has some advantages which could be considered.

Sample the following:
You invest in an index which is almost sure to go up in the long term, unlike some stocks which may simply disappear. It is well known that the trend of stock indices is up in the long term. Therefore, if you are not likely to need the money anytime soon, it might be worthwhile investing a fixed amount regularly in the index.

You invest regularly, in equal amounts every month, so that when markets are down you acquire more units and when markets are up you get less units, but the value of units already acquired in your account goes up. The only requirement for success is that you do not get discouraged and give up on fresh investments when markets go down sharply.

You attain automatic diversification, thus avoiding the temptation to get into hot stocks. As we have seen in the past, investors tend to favor ?hot stocks? in bull markets, such as technology in 1999 and real estate in 2007. Investing in an index prevents over-investment in any one sector, thereby enforcing a discipline in the investment process.

You benefit from the growth in the economy, without any significant effort in stock selection or rebalancing. This takes the judgmental factor out of investing. An investor does not have to worry about his individual investment decision going wrong due to faulty analysis, while participating in the growth from increasing stock prices
Indices routinely weed out stocks which are no longer relevant and replace them with new stocks. You gain from shifting business trends. For instance, software companies were included in the major indices only in 1998-99, but now form an integral part of the Sensex and Nifty. Similarly, DLF was added to the BSE Sensex at the cost of Dr Reddy?s Labs, in October, 2007.

You capture the long-term effects of compounding, since your gains are embedded in the upward movement of the indices. The essence of this strategy is to invest regularly and to resist the temptation of withdrawing unless you really need the money. This has the effect of giving a compounding boost to the performance.

Since you hold for the long term, you don?t have to pay any tax, which increases the compounding effect. We have the Warren Buffett philosophy at work here. Buffett believes that the longer he stays invested in a particular stock, the longer he defers paying taxes on the gains. These notional tax payouts stay in the investment and earn further returns till such time he decides to sell the stock. Indian investors have it better than Buffett, they do not have to pay any tax for equity investments held for more than one year.

The expenses charged by mutual funds for managing index funds are lower than those for actively managed funds. Though actively managed funds have managed to beat the indices and index funds handsomely over periods of over three years, this out performance comes with a dose of volatility. The expense ratios for index funds are in the range of 1% of assets as against 2% to 2.5% for actively managed funds. This higher expense is justified in the long run because of their out performance, but erodes investor returns when the markets are down

The Home insurance sector in India is at a nascent stage as compared to other insurance sectors in the country. With the real estate boom at its prime in India, home finance has become an indispensable part of real estate functioning. Moreover, the housing finance companies (HFCs) are also playing an important role in the evolvement of the home insurance company in India.


Due to the new regulations by the finance companies making home insurance mandatory for seeking home loans in India, the home insurance sector has recently seen massive revival in business. Industry analyst say that, if the home loans and insurance sector continue to facilitate each others growth, then the insurance segment is soon set to achieve a 100% growth. The latest growth curve shows the home insurance premium touching the Rs 150 crore-mark, registering a growth of 25% in the last financial year; and if the situation prevails, the trend is predicted to continue.
As the growth curve of investments in Indian real estate sector escalates, more and more insurance companies are making their foray into the home insurance sector. This has also initiated a trend of insurance companies from across the globe making their foray into Indian market either as individual entity or in joint ventures with the local existing insurance companies.


Home insurance and real estate has of late become conspicuous of the buzz it has created in the realty industry in India. Adding to the list of leading and existing public sector companies in the home insurance business like New India Assurance, Life Insurance Company of India, United India Insurance, Oriental Insurance and National Insurance Company; is a list of private insurance companies which are set to play a pivotal role in the growth of the sector.


The most thriving amongst those are mostly joint venture companies like ICICI Lombard General Insurance, Bajaj Allianz General Insurance, Tata AIG General Insurance Company Ltd, IFFCO-TOKIO and Royal Sundaram Alliance to name a few. Considering the feasibility of a largely huge and growing market, the home insurance sectors has lately expanded its business beyond the metros to the Tier I and II cities where real estate development is expected to flare up in the years to come.
The booming real estate sector in India is considered to be one of the most encouraging factors in the resurgence of the home insurance sector. However, apart from the real estate factor, the recent spate of calamities that has hit the country like the earthquakes, tsunami, the consistent flood every year in most parts of the country and the exceptional cases of 'deluge' in Mumbai in 2005 has made people opt for home insurance like never before. Besides that, the home insurance companies are also providing their customers with attractive policy plans to suit their needs and budget.


* Importance of Home Insurance
Home Insurance has evolved as one of the most enterprising sector in the real estate scenario in India. As more and more investments are made in the real estate sector, there has been a rising demand for home finance and home insurance simultaneously. The importance of home insurance in the protection of your house and valuable possessions is as importance as protecting your family from any hazards that act as threat to life and property.
The policy provided by the home insurance companies act as a guarantee that combines insurance of the home, its contents the personal possessions of the homeowner, risk attached to burglary; as well as liability insurance for accidents that may happen at the house like fire and natural calamities. The extent of the risk covered however depends on the type and content of the policy. A generally configured home insurance policy usually covers calamities in two categories - natural and man-made.


Natural Calamities Man-Made Calamities
Earthquake Burglary
Fire Terrorism
Lightning,Storm Riot
Cyclone Strike
Flood Malicious Damage
Tsunami Aircraft Laws
Landslide Impact from Rail/Road vehicles


Home insurance is important as it not only provides you with financial protection against any damage your property might incur - to both your buildings and the contents; but it can be considered a small amount of money you pay in lieu of the peace of mind that brings with it and the content that your property is insured and protected against all hazards. Though the importance of having a home insurance policy cannot be over emphasized, one cannot predict any disasters or unavoidable incident that might happen to one's home.

Home insurance not only protects the homeowner from total loss when disaster occurs, but also protects the home owner in the event that their home is damaged by acts of God or if a person becomes injured, the home owner will not be held solely liable for all of the damages. The home insurance policies usually cover a home under the all risks clause unless otherwise noted in an exclusion clause. For instance, a home can be covered for fire damage, earthquake damage, and acts of vandalism under an all risks policy, but if the policy states that the home is not covered for deluge or say tsunami, than water damage due to the mentioned natural calamity would not be covered.

To summarize it, the home insurance policy is important for the homeowner as it ultimately gives the home owner a sense of security to protect his family and property against calamities.


Home insurance in India has a key role to play in the protection of your house or building structure and valuable possessions or building content. Home insurance policy is a guarantee provided by the insurance company that combines insurance on the home, its contents the personal possessions of the homeowner, as well as insurance covering accidents that may happen at the house like fire and natural calamities. The coverage of the risk however depends on the type of policy.


There are mainly two types of home insurance in India
Building insurance

Content insurance


Buildings Insurance

Buildings insurance is an important part of property investments. The mandatory obligation made by the housing finance companies has strengthened the need for insurance in conjunction with property investments. Insuring the building or building structure is important since it protects you against inevitable losses in case your building is destructed and debilitated in any natural or man-made calamities.

The housing finance companies are insisting on building insurance so that in the event of a disaster it can be repaired or rebuilt, as lenders don't want to be left without security for their loan. A home insurance policy should cover expenditure to rebuild your home in the event of it being totally destroyed or damaged to the point that complete rebuilding is necessary (in eventualities like earthquake, fire etc).

Different home insurance companies have different specifications for policy coverage. It is recommended that you check the terms and conditions of the policy. Home insurance companies in India mostly have home insurance plans that insure the building structure of your home for its reconstruction value. This is the cost incurred to reconstruct the home if it is damaged and not for its market value such as the cost of land etc. Sum insured is calculated by multiplying the built up area of your home with the construction rate per sq. feet.

Home insurance plan for buildings are usually meted out on conditions as per the policy terms arising out of conditions like

Fire, Lightening, explosion of gas in domestic appliances
Bursting and overflowing of water tanks, apparatus or pipes.
Riot, Strike, Malicious or Terrorist Act
Flood, Inundation, Storm, Typhoon, Hurricane, Tornado or Cyclone
Damage due to earthquake, subsidence and Landslide (including Rockslide).
Damage caused by Aircraft & Impact damage
Third party liability and personal accident.


Content Insurance

Content insurance may be considered optional but with the threat of burglaries, natural disasters and fire, content insurance covers are rising in demand. Contents insurance for home insurance plans includes protection to movable goods, possessions or contents in the house; anything that is not a fixed parts of your home, for example your appliances, electronic goods, furniture and clothing.

Similarly as the modalities adopted in building insurance, different home insurance companies in India have different policies for content insurance. Most companies comply with insurance plans where a value equivalent to the market value of household contents i.e. the value for which this used item could be bought or sold in the market is covered as insurance.

The insured amount given against the perils for building or structure and its contents is assessed either on 'reinstatement value' basis -which is the value for replacing the item with a new item of same type and make; or on 'market value' basis -which is the reinstatement value less depreciation depending on the age of the item.
Content insurance offers protection against various perils including:

Fires
Storms/flooding
Explosions
Theft and vandalism
Valuables such as jewellery, cameras and watches against all risks,
Cover against all kinds of accidental breakage of plate glass fixed in doors and window frames.
Loss/damage to domestic appliances due to electrical and mechanical breakdown.


Home insurance can be availed for both building and content combined. However, most home insurance plans in India excludes underinsurance of the property value, willful destruction of property, loss, damage or destruction caused by war perils, wear and tear and atmospheric conditions etc., damage due to an act of terrorism(unless specifically covered) and losses or damages incurred when premises are unoccupied beyond 60 consecutive days.

As opposed to earlier times when an NRI had to struggle with Municipal rules, income tax and wealth tax issues, succession legislations for all religions, the Hindu joint family Act, land ceilings and others, these are times that have NRIs being welcomed with a red carpet.

All persons residing outside India holding Indian passports and also people of Indian origin have been granted permission by the Reserve Bank of India (RBI) to invest in both residential and commercial properties in India. Markets have stabilized and there is an impressive amount of interest in this segment. NRIs are quick to invest in properties in India where they see an opportunity for a good deal.


Many avenues are being created as well as schemes being fashioned for NRIs to maximize investments from abroad.

On the anvil is a single-window investment promotion council planned by the government, which will undertake investment promotional activity. This will involve making extensive contacts with potential investors, lobbying and interacting with individual companies so that the overseas Indian finds a suitable investment environment.


To an NRI, a base in the homeland also brings with it a sense of security. The number of NRIs who are investing in property for sentimental reasons and for better investment returns is quickly multiplying.

The government including RBI and Foreign Exchange Management Act (FEMA) has liberalized the rules and regulations for the NRIs to make investment in real estate. Liberalization along with the added advantage of repatriation of the capital invested and even the rental proceeds under the circumstances prescribed by RBI have also encouraged NRI investments in real estate. Capital gains can be taken back after paying capital gains tax. Apart from India being a safe destination, 10 to 12 per cent returns on the investments are assured.

The NRI investor can raise finances from financial institutions to purchase an apartment. The Housing Development and Finance Corporation (HDFC) and other financial institutions in India are facilitating the NRI investment in property speedily and efficiently. Though the rates of property tax are slightly different from what Indian residents pay, the NRI also enjoys the same status as any other property owner. NRIs pay property tax to the concerned authorities.

NRIs are considered the safer bet eligible for availing a home loan in India facility to purchase a property in India as they are prompt on repayment. The repayment of the home loan can be made through a normal banking channel by way of inward remittance. For those who earn an income in India through rent, dividends, pension, etc the loan can be repaid by way of direct debit into the accounts of Non-residents (External) [NRE] or Non-resident Indians. The existing balances in the Non-Resident (Non-Repatriable) rupee accounts have been allowed to be credited on maturity to convertible NRE account. This has boosted the real estate business.

The rules relating to investment and repatriation have been liberalized to the advantage of the NRIs. Foreign exchange dealers have been suitably empowered to deal with the matter of remittances. NRIs are free to repatriate in foreign currency their current earnings in India such as rent, dividend, pension, interest and the like based on appropriate certification. Online NRI banking in India and these accounts for NRIs have made life much easier for transactions involved in NRI investment in India.

What has also made NRIs flock to India has been the initiative by builders and real estate dealers to ensure transparency about the projects on offer and fairness in dealings. NRIs consider their investments to be safe and rewarding when they park their money in real estate India.


Many developers in Mumbai, Gurgaon, Pune, Delhi, Gujarat and Kerala have decided to plan expensive projects. The vast majority of NRIs is spread across the globe is one of the prime reasons that a large number of builders and developers are making painstaking efforts to woo the non-resident Indian. The Indian real estate developers are leaving no stone unturned in tapping the overseas markets. High-quality construction in India is attracting huge NRI investment in real estate. The surge in demand came as soon as the investment laws were revised to aid NRIs in moving their investments freely in and out of the country.

Group housing for NRIs is also being contemplated. The general pattern in investment shows that NRIs are investing in residential property in the above average and high segment.

NRIs are welcome to participate in real estate investments by way of huge investments in the construction of residential and commercial projects, SEZs and infrastructural facilities The pan Indian interest in property buying has spawned a new league of businessmen who pitch in for tracking and tracing of property and offer customized investor services to NRIs. Gulf NRIs have been buying property in India over the years to have a good real estate portfolio back home.
Thus, all the above dynamics, amongst many more, together, along with the fact that India is the tenth largest economy in the world and fourth largest in terms of PPP (Purchasing Power Parity), have made India a potential destination for NRI. Miscellaneous, but no less important, factors like manpower, literacy level, some of the best educational institutions, strategic location etc adds fuel to the fire. A recent World Bank report has predicted that Indian economy will become one of the strongest by 2050 A.D.